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Self-Reliant India Movement: An opportunity

IBEF, Knowledge Centre

May 20, 2020 23:41

At a time when the world is suffering from a deadly pandemic, India plans to convert this crisis into an opportunity and strengthen its fight by becoming Aatmanirbhar or self-reliant.

The term was coined by the Prime Minister of India, Mr Narendra Modi during his address to the nation on May 12, 2020. He called this campaign as Aatma Nirbhar Bharat Abhiyaan (Self- Reliant India Movement). He also defined five pillars of Aatmanirbhar Bharat – Economy, Infrastructure, System, Demography and Demand. He stressed upon the fact that it is time to become vocal for our local products and make them global. Under this campaign, a special economic package has been released by the government, which will benefit various segments including cottage industry, Micro, Small and Medium Enterprises (MSMEs), labourers, middle class, and industries, among others.

The economic package that was announced by the Prime Minister along with various packages released during the lockdown period comes to around Rs 20 lakh crore (US$ 283.73 billion), which is about 10 per cent of India's GDP. It is expected to provide support and strength to various sections of the country and give a renewed boost to the development journey of the country in 2020. In order to prove the determination of a self-reliant India, Land, Labour, Liquidity and Laws have all been emphasized in this package.

Minister of Finance & Corporate Affairs, Ms Nirmala Sitharaman made all the announcements related to various sectors on different days, split under five tranches and giving detailed information about the steps being carried out by the government.

Tranche 1 (Businesses including MSMEs)

The first measure being focussed on was the idea of Getting back to work i.e., facilitating employees and employers, businesses, especially MSMEs, to get back to production and workers back to gainful employment. Plans to strengthen Non-Banking Financial Companies (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector were also unfolded.

Pradhan Mantri Garib Kalyan Package (PMGK) was introduced in April 2020 in order to provide relief to underprivileged and help them fight the battle against COVID-19. The budget allocated to the scheme was Rs 1.70 lakh crore (US$ 24.12 billion). The support was given in the form of:

  • Insurance cover of Rs 50 lakh (US$ 70,932) per health worker
  • Five kg (kilogram) wheat or rice per person and one kg pulses for each household been given free to 80 crore people for the next three months
  • Rs 500 (US$ 7.09) to be transferred in the account of 20 crore women Jan Dhan account holders for the next three months
  • 8 crore poor families provided with gas cylinders, free of cost, for the next three months
  • MNREGA wage increased to Rs 202 (US$ 2.86) a day from Rs 182 (US$ 2.58) to benefit 13.62 crore families
  • Three crore poor senior citizen, poor widows and poor Divyang given ex-gratia of Rs 1,000 (US$ 14.18)
  • Front-loaded Rs 2,000 (US$ 28.37) being paid to farmers under existing PM-KISAN to benefit 8.7 crore farmers
  • Building and Construction Workers Welfare Fund allowed to be used to provide relief to workers
  • 24 per cent of monthly wages to be credited into PF accounts for the next three months for wage-earners below Rs 15,000 (US$ 212.79) per month in businesses having less than 100 workers
  • Five crore workers registered under Employee Provident Fund (EPF) to get non-refundable advance of 75 per cent of the amount or three months of the wages, whichever is lower, from their account
  • Limit of collateral free lending to be increased from Rs 10 to Rs 20 lakh (US$ 0.01 to 0.03 million) for Women Self Help Groups supporting 6.85 crore households
  • District Mineral Fund (DMF) to be used for supplementing and augmenting facilities of medical testing, screening etc.

The definition of MSME was revised by raising the investment limit and an additional criterion of turnover was introduced. Service sector will also be brought under MSME. The necessary changes in the law will be introduced accordingly.

Revised MSME Classification

Composite Criteria: Investment and Annual Turnover

Classification

Micro

Small

Medium

Manufacturing & Services

Investment < Rs 1 crore (US$ 0.14 million) and Turnover < Rs 5 crore (US$ 0.71 million)

Investment < Rs 10 crore (US$ 1.42 million) and Turnover < Rs 50 crore (US$ 7.09 million)

Investment < Rs 20 crore (US$ 2.84 million) and Turnover < Rs 100 crore (US$ 14.19 million)

 

  • Government also plans to replace trade fairs and exhibitions with e-market linkages to promote it. MSME receivables from government and CPSEs will be released in 45 days.
  • In order to help Indian MSMEs and other companies increase their businesses, no global tender will be allowed in Government procurement tenders up to Rs 200 crore (US$ 28.37 million).
  • To enhance the transaction-based lending Fintech (Financial Technology) will be used.
  • Government has also created emergency working capital of Rs 3 lakh crore (US$ 42.56 billion) for businesses including MSMEs. Under this, additional working capital finance of 20 per cent of the outstanding credit as on February 29, 2020, will be provided in the form of term loan at a concessional rate of interest. The units having turnover of up to Rs 100 crore (US$ 14.19 million) and have up to Rs 25 crore (US$ 3.55 million) outstanding will be eligible for this loan. They won’t be required to provide any guarantee or collateral of their own, as the amount will be 100 per cent guaranteed by the government.
  • There are around two lakh MSMEs who are either NPA or too stressed. A provision of Rs 20,000 crore (US$ 2.84 billion) has been made for these. Government will support them with Rs 4,000 crore (US$ 567.46 million) to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE). Whereas, banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15 per cent of their existing stake in the unit subject to a maximum of Rs 75 lakh (US$ 0.11 million).
  • In order to help MSMEs increase size as well as capacity, government plans to set Fund of Funds (FoF) with an amount of Rs 10,000 crore (US$ 1.42 billion) that will provide equity funding support for MSMEs. The FoF shall be operated through a Mother and a few Daughter funds. The FoF will be able to mobilise equity of about Rs 50,000 crore (US$ 7.09 billion). This will also aid MSMEs to be listed on the main board of stock exchanges.
  • In order to support employers and employee, statutory PF contribution will be reduced to 10 per cent from existing 12 per cent for all establishments covered by EPFO for the next three months. This is applicable for workers who are no covered under PMGK scheme. Around 6.5 lakh establishments and 4.3 crore employees covered under EPFO will be benefited. This will provide liquidity of Rs 6,750 crore (US$ 957.58 million) to employers and employees over three months.
  • Another Rs 30,000 crore (US$ 4.26 billion) special liquidity is provided to make investment in both primary and secondary market transactions in investment grade debt paper of NBFCs, HFCs and Micro finance Institutions (MFIs). The government will provide 100 per cent guarantee in this case.
  • Power Finance Corporation and Rural Electrification Corporation will introduce liquidity in DISCOMs to the extent of Rs 90,000 crore (US$ 12.77 billion) in two equal instalments. DISCOMs will utilise these funds to pay their dues to transmission and generation companies. 
  • Construction agencies are provided an extension of six months (without costs to contractors) for completion of contractual obligations for projects related to all central agencies like Railways, Ministry of Road Transport and Highways and Central Public Works Department (CPWD). 
  • Another relief is provided to taxpayers as the rates of Tax Deducted at Source (TDS) for non-salaried specified payments made to residents and rates of Tax Collected at Source (TCS) for the specified receipts shall be decreased by 25 per cent of the existing rates. This measure will release liquidity of Rs 50,000 crore (US$ 7.09 billion) and is applicable for the remaining part of FY21.

Tranche 2 (Poor, including migrant and farmers)

  • Migrant workers are being provide additional free food grains and chana for two months in the State/Union Territory they are stranded at present. Government has allocated Rs 3,500 crore (US$ 496.52 million) for this. Government also plans to introduce affordable rental housing complexes in order to provide social security and quality life to migrant labour, urban poor, and students etc. This will be implemented under PPP (public-private partnership) model.
  • Government will provide relief to small businesses under MUDRA-Shishu loans by providing interest subvention of two per cent for on time payees for a period of 12 months. The current portfolio of the scheme is Rs 1.62 lakh crore (US$ 22.98 billion) and an additional relief of Rs 1,500 crore (US$ 212.80 million) is provided by the government.
  • Street vendors will also get easy access to credit under a special scheme that will provide them initial working capital up to Rs 10,000 (US$ 141.86) for each enterprise. Urban and rural vendors doing business in the adjoining urban areas will be covered under the scheme. Around 50 lakh street vendors are expected to benefit and credit of Rs 5,000 crore (US$ 709.32 million) would flow to them. 
  • In order to provide boost to the housing sector and increase the demand for steel, cement, transport and other construction material, government has extended Credit Linked Subsidy Scheme for middle income group (annual Income between Rs 6 and 18 lakh (US$ 0.01 and 0.03 million)) up to March 2021. Around 2.5 lakh middle income families are estimated to benefit under this during 2020-21 and will lead to investment of over Rs 70,000 crore (US$ 9.93 billion) in the housing sector. 
  • Employment for tribals via Rs 6000 crore ((US$ 851.18 million) using Compensatory Afforestation Management & Planning Authority (CAMPA) Funds. This will for create Job opportunities in urban, semi-urban & rural areas for afforestation and plantation works
  • Government is providing direct support to the farmers in form of loans. National Bank for Agriculture and Rural Development (NABARD) will provide additional re-finance support of Rs 30,000 crore (US$ 4.26 billion) for meeting crop loan requirement of Rural Cooperative Banks and Regional Rural Banks (RRBs). This is over and above Rs 90,000 crore (US$ 12.77 billion) that will be provided by NABARD to this sector in the normal course. Around 3 crore farmers, mostly small and marginal, will get the benefit under this.
  • Government is also investing Rs 2 lakh crore (US$ 28.37 billion) in the farm sector and providing concessional credit to PM-KISAN beneficiaries through Kisan Credit Cards. The scheme will also include fishermen and animal husbandry farms.

Tranche 3 (Agriculture)

  • During the lockdown period, Minimum Support Price (MSP) purchases of amount more than Rs 74,300 crore, PM KISAN fund Transfer of Rs 18,700 crore (US$ 2.65 billion) and PM Fasal Bima Yojana claim payment of Rs 6,400 crore (US$ 907.93 million) have been made.
  • Government plans to strengthen infrastructure logistic and capacity building. It is providing Rs 1 lakh crore (US$ 14.19 billion) financing facility for funding Agriculture Infrastructure Projects at farm-gate and aggregation points (Primary Agricultural Cooperative Societies, Farmers Producer organizations, Agriculture Entrepreneurs, Start-ups, etc.).
  • In order to promote Prime Minister’s vision of ‘Vocal for Local with Global outreach’, Micro Food Enterprises (MFE) need technical up-gradation to achieve FSSAI food standards, build brands and marketing. Government is allocating Rs 10,000 crore (US$ 1.42 billion) for formalisation of MFE and support Farmer Producer Organisations, Self Help Groups and Cooperatives and existing MFEs.
  • For the marine sector, government plans to launch Pradhan Mantri Matsya Sampada Yojana (PMMSY). This will be focused on integrated, sustainable, and inclusive development of marine and inland fisheries. Allocation of Rs 11,000 crore (US$ 1.56 billion) for activities in Marine, Inland fisheries and Aquaculture and Rs 9,000 crore (US$ 1.28 billion) for Infrastructure (Fishing Harbours, Cold chain, Markets etc.) shall be provided. This is expected to generate employment for 55 lakh people and double the export to Rs 1 lakh crore (US$ 14.19 billion).   
  • An Animal Husbandry Infrastructure Development Fund of Rs 15,000 crore (US$ 2.13 billion) will be set up with an aim to support private investment in dairy processing, value addition and cattle feed infrastructure. Incentives will be given for establishing plants for export of niche products.
  • Government has allocated Rs 4,000 crore (US$ 567.46 million) for promotion of herbal cultivation by National Medicinal Plants Board (NMPB) in the next two years. Around Rs 5,000 crore (US$ 709.32 million) of income will be generated for farmers by herbal cultivation.
  • In order to support beekeeping, government has allocated Rs 500 crore (US$ 70.93 million) for the sector. Infrastructure including Integrated Beekeeping Development Centres, Collection, Marketing and Storage Centres, post-Harvest and Value Addition Facilities will be improved under the scheme.
  • “Operation Greens” run by the Ministry of Food Processing Industries (MoFPI) will be extended from tomatoes, onion and potatoes (TOP) to all fruit and vegetables (TOTAL) and will provide 50 per cent subsidy on transportation from surplus to deficient markets, 50 per cent subsidy on storage (including cold storages) and will be launched as a pilot for the next 6 months and will be extended and expanded thereafter. This will lead to better price realisation to farmers, reduced wastage, and affordability of products for consumers. Rs 500 crore (US$ 70.93 million) is being allocated for this scheme.

Tranche 4 (New Horizon of Growth)

Coal Sector

Government plans to introduce competition, transparency and private sector participation in the Coal Sector through:

  • Revenue sharing mechanism instead of regime of fixed Rupee/tonne
  • Entry norms’ will be liberalised

Government also plans to invest a total of Rs 50,000 crore (US$ 7.09 billion) in infrastructure development in the coal sector. This will be focused on evacuation of enhanced Coal India Limited’s (CIL) target of 1 billion tons coal production by 2023-24, plus coal production from private blocks. This will include Rs 18,000 crore (US$ 2.55 billion) worth of investment in mechanised transfer of coal (conveyor belts) from mines to railway sidings.

Mineral sector

In order to enhance private investments in the mineral sector, 500 mining blocks would be offered through an open and transparent auction process. Government also plans to introduce few policy reforms in order to increase efficiency in mining and production.

Defence Sector

Government has increased the Foreign Direct Investment (FDI) in the Defence manufacturing under automatic route from 49 per cent to 74 per cent. ‘Make in India’ for Self-Reliance in Defence Production will be promoted by notifying a list of weapons/platforms for ban on import with year wise timelines, Indigenisation of imported spares, and separate budget provisioning for domestic capital procurement. This will help reduce huge Defence import bill.

Aviation Sector

Government plans to ease the Indian Air Space so that civilian flying becomes more efficient. It is estimated to bring a total benefit of about Rs 1,000 crore (US$ 141.86 million) per year for the aviation sector. India also plans to become a global hub for Aircraft Maintenance, Repair and Overhaul (MRO). Aircraft component repairs and airframe maintenance cost to increase from Rs 800 crore to Rs 2,000 crore (US$ 113 to 283 million) in three years. Major engine manufacturers in the world are also expected to increase their engine repair facilities in India in the coming year.  

Power Sector

Government plans to introduce tariff policy reform in order to conserve consumer rights as well as promote industry. It also plans to privatise the sector in UTs in order to improve services to consumer and enhance operational and financial efficiency in distribution. 

Social Infrastructure Sector

In order to enhance the quantum of Viability Gap Funding (VGF) up to 30 per cent each of total project cost, government has allocated Rs 8,100 crore (US$ 1.15 billion). 

Space Sector

The government plans to provide opportunity to private companies in satellites, launches and space-based services. Policies will be reformed be reformed accordingly. Liberal geo-spatial data policy will provide remote-sensing data to tech-entrepreneurs.

Atomic Energy Related Reforms

In order to provide affordable treatment for cancer and other diseases with the help of medical isotopes and research reactor will be developed under PPP model. Nuclear sector will be linked with India’s robust start-up ecosystem, and for this,          Technology Development-cum-Incubation Centres will be set up for nurturing synergy between research facilities and tech-entrepreneurs.

Tranche 5 (Government Reforms and Enablers)

Employment Generation

Mahatma Gandhi Employment Guarantee Act (MGNREGS) has been awarded Rs 40,000 crore (US$ 5.67 billion) to help generate nearly 300 crore person days in total addressing need for more work including returning migrant workers in monsoon season as well.

Healthcare Sector

The government expects to increase the public expenditure in healthcare sector by investing in grass root health institutions and ramping up Health and Wellness Centres in rural and urban areas. Plan is to prepare India for any future pandemics through:

  • Infectious diseases hospital blocks in all districts
  • Strengthening lab network and surveillance – integrated public health labs in all districts and block along with block level labs and public health units to manage pandemics
  • Encouraging research by having a National Institutional Platform for One Health by ICMR
  • National Digital Health Mission

Education Sector

Government has launched PM eVIDYA, a programme for multi-mode access to digital/online education. Other initiatives to be launched include Manodarpan, New National Curriculum and Pedagogical framework, National Foundational Literacy and Numeracy Mission.

  • PM eVidya:
    • DIKSHA for school education across States/UTs: e-content and QR coded energized textbooks to be provided for all grades (one class, one channel)
    • One earmarked TV channel for each grade from 1 to 12
    • Extensive use of radio, community radio and podcasts
    • Special e-content for visually and hearing-impaired people
  • Manodarpan: to be launched on an immediate basis to provide psychological support for students, teachers and families on mental health and well-being
  • New National Curriculum and Pedagogical framework for early childhood, school and teachers will be launched, integrated with global and 21st century skill requirements
  • National Foundational Literacy and Numeracy Mission – to be launched by December 2020 to ensure that every child attains learning levels and outcomes in grade 5

Decriminalisation of Companies Act

  • Decriminalisation of Companies Act violations involving minor technical and procedural defaults.
  • Majority of the compoundable offences sections to be shifted to internal adjudication mechanism.
  • Amendments to de-clog the criminal courts and NCLT.
  • Seven compoundable offences dropped completely while five among the existing to be dealt under alternative framework.

Ease of Doing Business for Corporates

  • Direct listing of securities by Indian public companies in permissible foreign jurisdictions.
  • Private companies which list NCDs on stock exchanges will not be considered as listed companies.
  • Provisions of Par IXA (Producer Companies) of Companies Act, 1956 to be included in Companies Act, 2013
  • Provision to create additional/ specialized benches for NCLAT.
  • Lower penalties for all defaults for Small Companies, One-person Companies, Producer Companies and Start-ups.

Public Sector Enterprise (PSEs) Policy for a New, Self-reliant India

Government plans to introduce new policy under which:

  • List of strategic sectors requiring presence of PSEs in public interest will be notified.
  • Private sector will be allowed in strategic sectors. Leading to privatisation of PSEs.
  • It will also increase the number of private enterprises in strategic sectors and decrease the public holding companies to one or four maxima.

Support to State Governments

Central government has extended its support to State government from 3 per cent to 5 per cent for 2020-21 only, providing states extra resource of Rs 4.28 lakh crore (US$ 60.72 billion).

Thus, the total funds provided by the government stood at Rs 20 lakh crore (US$ 2.84 billion) and is expected to strengthen the fight against COVID-19 and support the Indian economy.

Overall Stimulus provided by Aatmanirbhar Bharat Package

Sn No.

Item

Rs crore

US$ billion

1

Tranche 1

5,94,550

84.35

2

Tranche 2

3,10,100

43.99

3

Tranche 3

1,50,000

21.28

4

Tranche 4 and 5

48,100

6.28

 

Sub-total

11,02,750

156.44

5

Earlier Measures including PMGKP

1,92,800

27.35

6

RBI Measures (Actual)

8,01,603

113.72

 

Sub-total

9,94,403

141.07

Total

20,97,153

297.51


 

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